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Railway Sector Assessment for Pakistan

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RAILWAY SECTOR ASSESSMENT FOR PAKISTAN MARCH RAILWAY SECTOR AssESSMENT FOR PAKISTAN MARCH 2021 The boundaries, colors, denominations, and any other information shown on the maps do not imply, on the part of ADB, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries, colors, denominations, or information. Note: In this publication, “$” refers to United States dollars. Cover design by Edith Creus. Cover photos (left to right): Train at Karachi Station, entrance to Karachi Station, and locomotive being refurbished at Mughalpura Workshop (photos by ADB). CONTENTS TABLES, FIGURES, AND BOX iv ACKNOWLEDGMENTS v ABBREVIATIONS vi CURRENCY EQUIVALENTS vi 1 INTRODUCTION AND BACKGROUND 1 A. Introduction 1 B. Railway network and port facilities 1 C. Institutional responsibilities for railways 5 D. Cross-border railway routes 6 E. Relevant CAREC corridors 10 2 TRENDS IN RAILWAY TRAFFIC 13 A. Introduction 13 B. Background 13 C. Analysis of traffic 13 1. Traffic carried by land transport 13 2. Railway traffic 14 3. Cross-border and transit traffic 18 D. Traffic growth scenario 21 3 MARKET COMPETITIVENESS 22 A. Introduction 22 B. Setting for competition 22 C. Market feedback 22 1. Positive feedback 22 2. Issues affecting rail competitiveness 23 4 RAILWAY OPERATING AND FINANCIAL PERFORMANCE 25 A. Introduction 25 B. Commercial orientation 25 C. Financial performance 27 D. Operational benchmarking 29 5 PROPOSALS FOR INVESTMENT, cOMMERCIALIZAtion, anD REFORM 33 A. Introduction 33 B. Policy setting 33 C. Proposals for support from CAREC Railway Sector Development TA 34 1. Prefeasibility studies 34 2. Knowledge products and events 36 APPENDIX: CAREC DESIGNATED RAIL CORRIDORS 38 REFERENCES 40 iii Tables, FiguRes, AND BOX TABLES 1.1 Size and Condition of Pakistan Railways’ Broad Gauge Rolling Stock Fleet 4 2.1 Pakistan Road and Railway Traffic Turnover and Mode Share, 1996/1997 to 2005/2006 13 2.2 Pakistan Railways Annual Freight Traffic by Principal Commodity, 2007/2008 to 2017/2018 17 2.3 Cargo Handled by Pakistan Ports, 2014/2015 to 2018/2019 19 2.4 Pakistan Imports by Value and Trading Partner, 2018 19 2.5 Pakistan Exports by Value and Trading Partner, 2018 20 3.1 Potential Rail Competitiveness of Pakistan for Different Traffic Types 23 4.1 Pakistan Railways Profit and Loss Account, 2015/2016 to 2017/2018 27 FIGURES 1.1 Pakistan Railway Network Including Border Crossings 3 1.2 Administrative Structure of Pakistan Railways 6 1.3 Regional Rail Links and Ports Serving Cross-border and Transit Traffic 7 1.4 Sections of CAREC Corridor 5 Relevant for Pakistan 11 1.5 Sections of CAREC Corridor 6 Relevant for Pakistan 12 2.1 Pakistan Railways Average Annual Freight and Passenger Volume and Turnover, 1950–2018 14 2.2 Pakistan Railways Annual Freight and Passenger Volume and Turnover, 2010/2011 to 2017/2018 15 2.3 Multicountry Comparison of Freight Volume and Population 16 2.4 Pakistan Coal Consumption, 2013–2018 18 4.1 Reported Pakistan Railways Operating Revenues and Expenses, FY2011–2018 28 4.2 Pakistan Railways Operating Revenues and Expenses, 2012/2013 to 2017/2018 28 4.3 Comparison of Railway Length and Staff Size in Pakistan, 30 other CAREC Member Countries and other Leading Railway Countries 4.4 Comparison of Railway Rolling Stock Fleet in Pakistan, 30 other CAREC Member Countries and other Leading Railway Countries 4.5 Comparison of Annual Railway Freight and Passenger Traffic Levels in Pakistan, 31 other CAREC Member Countries and other Leading Railway Countries 4.6 Comparison of Railway Track and Staff Productivity in Pakistan, 31 other CAREC Member Countries and other Leading Railway Countries 4.7 Comparison of Locomotive and Wagon Productivity in Pakistan, 32 other CAREC Member Countries and other Leading Railway Countries BOX 4.1 Overall Directions for Railway Transport Under the National Transport Policy 26 iv ACKNOWLEDGMENTS his country railway sector assessment is part of an Asian Development Bank (ADB) technical assistance (TA) Tproject on Railway Sector Development in Central Asia Regional Economic Cooperation (CAREC) Countries. The project has been assisting CAREC member countries to identify promising opportunities for investment in cross-border railways and develop railway commercialization and reform measures to strengthen railway performance in accordance with the CAREC Railway Strategy approved by CAREC ministers in 2017. Preparation and supervision of the project was led by Jurgen Sluijter, Senior Transport Specialist, and overseen by Dong-Soo Pyo, Director, Transport and Communication Division, Central and West Asia Department. Administrative support was provided by Krisanta Carissa Vila, Associate Project Analyst. Project activities were guided by the members of the CAREC Railway Working Group, CAREC Railway Focal Points, and national TA coordinators. The Pakistan railway sector assessment was prepared by a team of TA consultants. Country-level consultations and research were carried out by Udo Sauerbrey, Railway Reform and Restructuring Specialist and Bilal Paracha, Transport Specialist. Report preparation was led by Tyrrell Duncan, Team Leader/Railway Specialist. Valuable insights and information were provided by Pakistan Railways, the Ministry of Railways, other government departments, international development partners, and representatives of the private sector. Useful comments were provided by ADB staff including Ko Sakamoto and Johan Thierry Georget. v ABBREVIATIONS 1 ADB Asian Development Bank BRI Belt and Road Initiative CAREC Central Asia Regional Economic Cooperation CPEC China–Pakistan Economic Corridor ICT information and communication technology IFRS International Financial Reporting Standards km kilometer kph kilometers per hour MC Member Country ML1 Main Line 1 ML2 Main Line 2 ML3 Main Line 3 MOR Ministry of Railways PPP public–private partnership PR Pakistan Railways PRC People’s Republic of China PRSP Pakistan Railway Strategic Plan PSO public service obligation SOE state-owned enterprise TA technical assistance TEU twenty-foot equivalent UIC International Union of Railways CURRENCY EQUIVALENTS (as of 27 July 2020) Currency unit – Pakistan rupee/s (PRe/PRs) PRe1.00 = $0.0060 $1.00 = PRs166.61 vi 1 INTRODUCTION AND BACKGROUND A. Introduction actions, that could be considered for support through the TA. This short report summarizes the findings of 1. In 2017, the eleven Member Countries (MCs) the railway sector assessment for Pakistan, based on of the Central Asia Regional Economic Cooperation several country visits, consultations with the Ministry (CAREC) program approved the CAREC Railway of Railways (MOR) and Pakistan Railways (PR), and Strategy with a view to expanding the role of information obtained through the market feedback. railway transport in the region.1 The strategy aims to accelerate the identification, preparation and financing of feasible railway investment projects and, at the same time, advance the commercialization B. Railway network and reform of railways to improve their performance and port facilities (ADB 2017). 4. Railway network. The Islamic Republic of 2. In 2018, the Asian Development Bank (ADB) Pakistan is a mountainous, lower-middle income approved a $2 million regional technical assistance country with a population of 212.8 million in 2018 (TA) project for CAREC Railway Sector Development (ADB 2019). It has borders with Iran to the west, to assist MCs in implementation of the CAREC Afghanistan to the north and northwest, the Railway Strategy (ADB 2018).2 The TA is intended People’s Republic of China (PRC) to the Northeast, to accelerate the sound development of the railway and India to the east. The Northern Highlands3 sector in CAREC countries by providing support mountain range separates the Indus Plain in the east for railway transport market research, project of the country from the Sistan Basin in the west. identification and preparation, knowledge sharing and The northern border with Afghanistan also runs along preparation of practical actions for commercialization this mountain range. and reform in MCs. 5. Most of Pakistan’s railway network was 3. During the first part of TA implementation, established when it was part of colonial India under the TA consultants conducted assessments of British rule. The first railway line was between the port the railway sector in each MC. The purpose of of Karachi and the hinterland city of Kotri. It opened these assessments was to examine the setting, for traffic in 1861. Over the next 50 years, further characteristics, performance and prospects lines were built to extend the railway in a northeasterly of railways, and identify promising investment direction via Nawabshah, Rohri, and Bahawalput to opportunities, and commercialization and reform the major cities of Lahore, Islamabad, and Peshawar. 1 The eleven CAREC MCs are Afghanistan, Azerbaijan, the People’s Republic of China (specifically the Xinjiang Uygur Autonomous Region and the Inner Mongolia Autonomous Region), Georgia, Kazakhstan, the Kyrgyz Republic, Mongolia, Pakistan, Tajikistan, Turkmenistan, and Uzbekistan. 2 The TA is cofinanced by the People’s Republic of China (PRC) Poverty Reduction and Regional Cooperation Fund and the United Kingdom Fund for Asia Regional Trade and Connectivity (under the Regional Cooperation and Integration Financing Partnership Facility). 3 Including parts of the Hindu Kush, the Karakoram Range, and the Himalayas. 1 2 Railway Sector ASSESSMENT for PAKISTAN From 1886 all railways were consolidated
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